Outsourcing Definition,Introduction to Outsourcing,Define Outsourcing

Outsourcing Defined

Introduction

Despite receiving a lot of attention in the last decade,
outsourcing is still a term many people do not understand
fully. Let us, in this section, try to examine some of the
basic factors that are common to all types of outsourcing
and thus derive a definition.

A Simple Definition

Let us do away with the more complex aspects of outsourcing
and look at the basics. Outsourcing at its simplest is when
a company or individual delegate some of its specific tasks
to another individual who is not their direct employee, or
another company. The individual or the company receive
monetary compensation in exchange for the services rendered.

This way, we can see that outsourcing does not necessarily
mean only situations where large corporations are involved.
It can also apply to small companies and entrepreneurs who
get some of their work done by people who are not their
employees.

Domestic and Overseas Outsourcing

Similarly, outsourcing is not always about getting your
manufacturing work done overseas. There are situations where
both the client and the service provider reside in the same
country. It is understood that outsourcing often brings cost
benefits; however outsourcing work overseas is not always
necessary for this purpose.

The scenario where companies outsource work overseas is
familiar to most people. Both large corporations and small
companies get their manufacturing, customer relations
management and other work done overseas to enhance their
profits. This is especially true for companies in the United
States where manufacturing, material and manpower cost much
more than the outsourcing destinations.

Why Outsource?

We have already seen that cost savings is one major reason
why companies outsource. There are also other factors like
greater flexibility and access to a larger number of skilled
people without actually employing them.

As stated earlier, manufacturing, labor and material costs
are much higher in the United States than in countries like
India where skilled labor is easily available. Domestic
outsourcing can also reduce costs. People hired on a
contract/outsourcing basis do not have to be paid for
medicare, pension and other benefits and thus they prove to
be easier on the company's budget.

Apart from this outsourcing also offers greater flexibility
to companies. Companies develop a larger network of
qualified individuals and specialist companies through
outsourcing. This comes in handy when the company needs a
larger than usual or more complicated project at hand.

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